Is there a way to make smooth interpolated motion with the graph editor?
Yes, you can do this with the graph editor:



If your goal is to exactly follow a particular path or route, then there are certainly better ways to go about it (such as using a follow path constraint, as mentioned by moonboots), but you can in fact make a perfect circle using the graph editor without any keyframes at all; using sine modifiers:



Here I've set a sine modifier on both the X and Y channels with Phase Offset on the X channel of $\frac{\pi}{2}$ (or 90°). The Amplitude and Phase Multiplier are only set in order to match the example from above.

The follow path constraint is easier to control when you are looking to.. well, follow a particular path (big surprise), but often you don't care too much about the exact path but more that each motion flows smoothly into the next. The graph editor gives you fine control over exactly how that happens.